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European markets recover in volatile early trading

European share prices were volatile in early trading on Wednesday, with most stock exchanges opening higher as investors welcomed the US Federal Reserve’s pledge to keep interest rates near zero for the next two years.

REUTERS - European shares pared gains on Wednesday as the rally spurred by a U.S. Federal Reserve promise to keep interest rates unchanged for two-year started to lose steam.

Banks turned negative, with Italian lenders the stand out fallers as traders said investors could be swapping their bank shares into Italian bonds.

The STOXX Europe 600 Banks index was down 0.4 percent and was among the worst performers. UniCredit SpA fell 3.2 percent and Intesa Sanpaolo lost 3.4 percent.

A trader said most buying was through more passive investments such as tracker indexes rather than an active management approach, suggesting there was still caution in the market.

“Today and maybe for the rest of the week we should have a technical reaction to the sell-off, but short term oriented traders and hedgefunds are selling into this move already,” said Swiss based hedge fund manager Trung-Tin Nguyen.

By 0843 GMT, the pan-European FTSEurofirst 300 index of top shares was up 0.5 percent at 952.72 points having been up as much as 965.05 earlier. It gained 1.2 percent in the previous session, halting a 20 percent dive over 2-1/2 weeks.